Budget deficit shrinks to lowest level under Obama

The federal budget outlook will continue to improve this year, with the deficit projected to shrink to $514 billion — the lowest level since President Barack Obama took office.

Rebounding tax receipts and slower spending will help narrow the budget shortfall for the third consecutive year, the Congressional Budget Office said on Tuesday. The deficit will continue to fall next year, to $478 billion, before beginning to climb again in 2016, as costs related to aging baby boomers mount.

The forecast helps explain why fiscal issues have slipped from the top of lawmakers’ agenda. After battling over taxes and spending for much of the last three years, with repeated standoffs over funding the government and raising the debt limit, lawmakers in both parties have largely moved on. Democrats are eager to focus on income inequality, while Republicans want to keep attention on the troubled Obamacare launch.

The report predicts enrollment this year in Obamacare will likely be about 2 million less than projected, thanks to the bungled roll-out, while CBO sees the law cutting into the number of workers by more than expected.

Republicans seized on those figures. “CBO Report Confirms Devastating Impact of Obamacare on Jobs,” House Speaker John Boehner said in an email blast to reporters.

The report estimated the law will reduce the total number of hours worked by about 1.5 percent or the equivalent of roughly 2 million full time workers. That’s “almost entirely” because people will choose to work less, rather than because businesses will demand fewer workers, CBO said.

Obamacare offers people help buying private insurance on a sliding scale, according to income. So some people will decide to work less or not take a job if it means their higher earnings would disqualify them for some of those subsidies.

“The logic applies to a variety of programs,” said CBO Director Doug Elmendorf.

The agency also said it now expects about six million people — not seven million — to sign up this year for insurance through the Obamacare exchanges, while Medicaid enrollment will similarly be off by 1 million because of technical problems with the law’s roll-out. “The exchanges operated by the federal government have struggled to transfer application information to state agencies for people who might be eligible for Medicaid,” the report said.

The problems will likely only be temporary though, CBO said, projecting enrollment will grow rapidly in coming years as the public becomes more familiar with the program. By 2016, 22 million will join the exchanges.

So far, those signing up have seen premiums about 15 percent cheaper than the agency anticipated.

On the debt limit, the analysis showed lawmakers will need to act by early March. The Treasury Department will run out of the so-called “extraordinary measures” it uses to stave off default by late February or early March and “sometime during the first half of March” it will run out of cash as well, leaving it unable to pay all of the government’s bills.

CBO sees the economy making solid gains, with growth exceeding 3 percent this year and next, though the jobless rate will likely remain above 6 percent until late 2016.

“Today’s report underscores why President Obama and Democrats in Congress are so committed to boosting job growth,” said Rep. Chris Van Hollen, the top Democrat on the Budget Committee.

Republicans noted the good news will only be temporary. The CBO anticipates the deficit will begin growing again in 2016, to $539 billion, as retiring baby boomers swell the ranks of government beneficiaries, interest payments on the debt rise with interest rates and health care costs continue to rise.

By 2022, the government will once again be running trillion-dollar deficits, the report said.

“We still have a lot of work to do,” said House Budget Committee Chairman Paul Ryan.

Lawmakers can take some credit for the short-term improvement in the budget outlook, the report showed, though the strengthening economy helps as well. Congress has repeatedly raised taxes on the wealthy, as part of last year’s fiscal cliff agreement and, before that, Obamacare, while simultaneously cutting spending.

Tax revenues, which plunged during the recession, will be up 9 percent this year and another 9 percent next year. Spending, meanwhile, will grow this year by just 2.6 percent, CBO said.